Mirant files for bankruptcy day before big debt due

FINANCIAL TURMOIL
The company's president said an inability to reach a deal with creditors had hurt the attempt to come up with an out-of-court restructuring package

AP , ATLANTA

Energy supplier Mirant Corp succumbed to bankruptcy after struggling for more than a year with heavy debt and weak revenues, aggravated by questions about the company's accounting and behavior in California's energy market.

Mirant filed its Chapter 11 petition late Monday, the day before a US$1.1 billion payment was due.

The filing is the latest milestone of financial turmoil for the company, which joined its rivals in furiously selling assets, trimming the size of trading contracts and refinancing debt since the 2001 demise of Enron Corp.

That debacle -- coupled with a long slump in energy prices -- left investors nervous about the huge debt loads independent energy merchants were carrying on their books and prompted credit downgrades for most firms, including Mirant.

In its petition, Atlanta-based Mirant listed US$20.6 billion in assets, US$11.4 billion in debt and US$1.17 billion in cash.

The filing, along with one in Canada relating to several subsidiaries there, was filed in US Bankruptcy Court in Fort Worth, Texas.

Spokesman James Peters said the company has some assets in Texas, but he was unclear why the case was filed there.

Mirant Corp, Mirant Americas Generation, LLC and nearly all the companies' wholly owned subsidiaries in the US are included in the Chapter 11 filings.

Excluded from the filings are the company's operations in the Philippines and the Caribbean.

Mirant said the court allowed it to honor obligations under existing and future trading and marketing contracts that support its asset base.

The protection applies only to parties that do not terminate trading and marketing contracts because of Mirant's filing.

Mirant's Chapter 11

* The bankruptcy filing came after the energy company was unable to reach a last-minute debt restructuring plan with creditors.

* The company listed US$20.6 billion in assets, US$11.4 billion in debt and US$1.17 billion in cash, in its petition to US Bankruptcy Court in Fort Worth, Texas.

* Mirant Corp, Mirant Americas Generation, LLC and nearly all the companies' wholly owned subsidiaries in the US are included in the filings.

* Excluded are Mirant's operations in the Philippines and the Caribbean.

* The company has not yet drawn up a reorganization plan.

* Mirant also submitted a motion to the court asking for permission to keep paying its 7,000 employees.

Mirant has not yet formulated a reorganization plan, so it is unclear how creditor and stockholder claims would be treated.

Peters said the company also has filed a motion requesting that the court allow it to keep paying its 7,000 employees.

The bankruptcy filing came after Mirant was unable to reach a last-minute out-of-court debt restructuring plan with its creditors.

President and chief executive Marce Fuller said the company's inability to strike an agreement with creditors unsettled investors.

"This, in turn, put a strain on our liquidity and threatened the feasibility of our business plan." she said in a statement.

"Add to this, uncertainty about the timing of the recovery in power prices and a slow economic recovery in the US, and it became clear that a comprehensive financial reorganization was the best approach for our stakeholders," the statement continued.

Last month, Mirant outlined a plan to exchange US$1.45 billion in debt bonds that are due or allowed to be sold within the next three years for ones due in five years. That plan is now moot.

Contributing to its problems were US$2.4 billion in losses last year, an audit that found US$188 million in income overstatements, and allegations that it and other suppliers manipulated prices that led to California's energy crisis three years ago.

Mirant has denied the allegations.

Shares of Mirant, a spinoff of Southern Co, are down about 95 percent from a peak of US$47 in 2001.

A bankruptcy filing under Chapter 11 frees a company from the threat of creditors' lawsuits while it reorganizes its finances.

The debtor's reorganization plan must be accepted by a majority of its creditors. Unless, the court rules otherwise, the debtor remains in control of the business and its assets.